29 Jun Question On March 31, 2011, the Herzog
QuestionQuestion
On March 31, 2011, the Herzog
On March 31, 2011, the Herzog Company purchased a factory complete with machinery and equipment. The allocation of the total purchase price of $1,000,000 to the various types of assets along with estimated useful lives and residual values are as follows:
Assets
Cost
Estimated Residual Value
Estimated Useful Life in Years
Land
100,000
N/A
N/A
building
500,000
none
25
Machinery
240,000
10% of cost
8
Equipment
160,000
13,000
6
Total
1,000,000
On June 28,2012, machinery included in the March 31, 2011, purchase that cos $100,000 was sold for $80,000. Herzog uses the straight-line depreciation method for buildings and machinery and the sum-of-the-years’-digits method for equipment. Partial-year depreciation is calculated based on the number of months an asset is in service.
Required:
1. Compare depreciation expense on the building, machinery, and equipment for 2011.
2. Prepare journal entries to record (1) depreciation on the machinery sold on June 29,2012, and (2) the sale of machinery.
3. Compute depreciation expense on the building, remaining machinery, and equipment for 2012.
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